CSSB 48(HES) - STATE HEALTH INSURANCE CHAIRMAN ROKEBERG announced the committee would address CSSB 48(HES), "An Act relating to health insurance provided by and provisions relating to the Comprehensive Health Insurance Association." He invited the sponsor's representative forward. Number 0055 DAVID GRAY, Legislative Assistant to Senator Jerry Mackie, Alaska State Legislature, came forward to present SB 48 on behalf of the bill sponsor. Mr. Gray spoke from the sponsor statement: "The Alaska Legislature created the Comprehensive Health Insurance Association, popularly called CHIA, in 1992 to provide a health insurance pool, a safety net if you will, for ... any individual Alaskan whose health condition was considered uninsurable or who could not otherwise find adequate health coverage. The legislation mandated that all providers of health insurance in the state must participate in the pool. The association then makes health insurance directly available to Alaskan residents who are high risk or are federally defined eligible individuals. These people typically suffer the most severe health conditions and face insurmountable costs of medical treatment and care. "In addition to operating the health insurance pool, the board of directors of CHIA, which include[s] two consumer advocates, ... is directed to periodically report on the effectiveness of the association in promoting rate stability, product availability, and affordability of coverage and to make recommendations on further legislative or administrative improvements. Senate Bill 48 is the direct result of this effort by the association to make the program work better and more efficiently. The legislation has the support of the Division of Insurance. "Senate Bill 48 amends the Title AS 21.55 which established the association ... and the rules and duties that it operates under. The bill amends the title to 1. Allow the board greater flexibility to design more cost effective health insurance plans for individuals ... 2. To increase the number of potential administrators of the CHIA by eliminating the requirement that the administrator be an insurer 3. To allow greater flexibility in evaluating an administrator ... and in setting the terms of the administrative contract 4. Simplifying administration by decreasing the number of declinations required for eligibility 5. Make technical corrections relating to the determination of premium rates, terminology, premium payment modes, board members' terms and voting at ... board meetings ... 6. To give the director of insurance a more effective and appropriate mechanism to enforce the requirements that members pay their share of the CHIA assessment on a timely basis. "This legislation will allow the board to manage the CHIA in a more cost effective and efficient ... manner. Also, the legislation is particularly important in light of new federal requirements and the use of CHIA as the mechanism to guarantee portability of health insurance coverage to federal eligible individuals." MR. GRAY noted there were teleconference witnesses available to speak to the legislation's technical provisions. Number 0313 REPRESENTATIVE HALCRO asked how this program is similar to other states', if other states have this type of program. MR. GRAY replied he really couldn't answer to what other states have, adding, "But I know that this legislation was a result ... of the legislature's previous concern trying to find a statewide health care system ...." Mr. Gray indicated this issue had been struggled with and different plans had been brought up. This was one of the direct results: anybody should be able to get health insurance somewhere. There is no way an insurer can take someone, for example, who has terminal cancer as a preexisting condition. Therefore, this was a way the legislature at that time essentially forced everyone selling insurance to pool together and take care of that small group of people. Mr. Gray commented someone could make himself/herself poor and receive some assistance in that manner. However, he noted there is a dignity issue. As the committee would hear from the testimony, these people want to be able to buy the insurance and be taken care of for radically expensive health care. Number 0431 REPRESENTATIVE HALCRO explained this was the first time he has heard of the program. He noted, then, any company offering health insurance in Alaska has to participate in this pool, and if he falls under the category he can go this pool and receive a policy. Representative Halcro asked who his insurer would be. MR. GRAY replied the association. REPRESENTATIVE HALCRO commented, then, if he is an insurance company he contributes to this pool. Representative Halcro questioned the method by which the companies contribute: Does the company pay a premium, and what is that premium based on? Number 0469 MR. GRAY answered, "They offer different kinds of premium copayment plans and whatever else like that, ... but you're insured by the association. Your medical costs will be borne by the association, ... and the individual member will contribute ... to your medical expenses, if you will medical costs, in proportion to the amount of the insurance that they sell ... in the state. So, you have bigger insurance companies, smaller insurance -- everybody essentially pays a fair share of your costs." REPRESENTATIVE HALCRO noted, then, it is based on market share and the larger companies contribute more to this pool. MR. GRAY agreed on both points. CHAIRMAN ROKEBERG informed the committee both Mr. Ference, of the Division of Insurance, and Mr. Blaker, representing the plan administrator, were online via teleconference. Number 0541 REPRESENTATIVE CISSNA referred to Section 7 of CSSB 48(HES), on pages 5 and 6. * Sec. 7. AS 21.55.120(c) is amended to read: (c) The [EXCEPT AS PROVIDED IN (e) OF THIS SECTION, THE] sum of the deductible and copayments required in any calendar year under a plan may not exceed a maximum limit of $1,500 plus the deductible [$2,000 PER COVERED INDIVIDUAL]. Covered expenses incurred after the applicable maximum limit has been reached shall be paid at the rate of 100 percent of usual, customary, reasonable, or prevailing charges, except that expenses incurred for treatment of mental and nervous conditions shall be paid at the rate of 50 percent. [THE $2,000 MAXIMUM SHALL BE ADJUSTED YEARLY TO CORRESPOND WITH THE CHANGE IN THE MEDICAL CARE COMPONENT OF THE CONSUMER PRICE INDEX AS ADJUSTED BY THE DIRECTOR.] REPRESENTATIVE CISSNA questioned why the coverage for mental and nervous conditions is half of the other coverage. MR. GRAY believed that is current law, deferring to the Division of Insurance for a more detailed answer. REPRESENTATIVE CISSNA noted, then, it is Mr. Gray's understanding that the percentage is locked in. Number 0611 REPRESENTATIVE BRICE explained it is not locked in; it is in current statute and this bill does not change that, although it could. CHAIRMAN ROKEBERG pointed out that this is the insurance pool of last resort for those who cannot obtain insurance anywhere else. The premiums are extremely high. If some additional parity like the mental health insurance was added, the chairman stated, "It would blow the premium off the map." Chairman Rokeberg compared learning about this pool to "Health Insurance 101" regarding how health insurance works in Alaska. Number 0696 ROSS BLAKER, Established Business, Aetna U.S. Healthcare (Aetna); Board Member, Comprehensive Health Insurance Association (CHIA), testified next off-network via teleconference from Anchorage. Mr. Blaker indicated he is present to answer questions. CHAIRMAN ROKEBERG indicated he wished Mr. Blaker to provide the committee with a brief overview of CHIA ["CHIRPA (ph)" stated on tape], how it works, some premium examples, and the reason this legislation is necessary. Number 0739 MR. BLAKER explained the premiums are basically set up by statute. The premiums are supposed to be up to 200 percent of the average individual premium. The problem is that there are very, very few individual carriers in Alaska; there are primarily group insurance carriers doing group business. Mr. Blaker noted the board has apparently somewhat targeted towards 150 to 160 percent of the individual premium rates. They try to make the insurance as affordable as possible to the individual. There has been one premium increase during the period of the pool's operation; Mr. Blaker guesses there will be another premium adjustment January 1 [2000]. CHAIRMAN ROKEBERG questioned how long the pool has been available and some idea of the current premium amount. MR. BLAKER answered that the pool was available in 1992. Regarding the premiums, he noted they have a number of different deductibles: from $200 to $10,000. They tried to structure it so a new member could choose how much risk he/she wished to bear personally. There are five or six different plans, including some Medicare supplement plans. Number 0847 CHAIRMAN ROKEBERG gave the example of a non-Medicare plan with a $500 deductible. MR. BLAKER responded that premium would be $388.50 per month for a 35 to 39-year-old individual. Mr. Blaker commented these rates have been effective since July 1, 1996. CHAIRMAN ROKEBERG questioned if that was 80 percent co-insurance up to what. MR. BLAKER replied $2,000 out-of-pocket. CHAIRMAN ROKEBERG said that did not sound like too bad of a policy. He questioned if the policy covered just basic medical. MR. BLAKER answered that it is a comprehensive medical plan covering doctor visits in and out of the hospital, inpatient and outpatient hospital expenses, prescription drugs, X-ray and laboratory. It is a very comprehensive plan, similar to an individual plan. Mr. Blaker stated, "There's no particular exclusions here, there would not be (indisc.) other plans out there." CHAIRMAN ROKEBERG asked about preexisting conditions. MR. BLAKER replied that if someone had past coverage the person could come into the CHIA plan with no preexisting limitation. He gave the example of a person insured under an employer's group plan who lost his/her employment or coverage. For someone without past coverage, there would be a six-month waiting period on preexisting conditions. After the six months, the person would receive the same coverage as for any other condition. Mr. Blaker confirmed for the chairman that this would apply to, for example, someone with cancer who had no previous insurance. The person could enter the CHIA plan and after six months the policy would cover that condition. Number 0992 REPRESENTATIVE CISSNA referred to the different coverage percentages specified in Section 7 for medical conditions as opposed to mental and nervous conditions. Noting this is an issue the legislature has been debating, Representative Cissna commented there seems to be some support for the idea that mental health therapies often lower medical costs, especially in areas like pain management. She has seen it happen. Representative Cissna questioned whether Mr. Blaker had some statistics or an idea of the potential increase in coverage costs if they were to change that percentage to 75 or 100 percent, and if he sees any large impediments to doing so. She noted she is simply brainstorming here. MR. BLAKER responded he did not know but could probably find that out. REPRESENTATIVE BRICE asked Mr. Blaker to explain the process by which an individual would purchase the health insurance, indicating these products are not just open to everyone. MR. BLAKER replied the CHIA is only open to those people who have been rejected by other carriers or who have a specified condition. In response to Representative Brice's further question about the six-month wait for a preexisting condition, Mr. Blaker clarified that someone with prior coverage who, for example, had been terminated from an employer and had gone through his/her extended "COBRA" coverage could come into the pool without a preexisting limitation. Number 1162 CHAIRMAN ROKEBERG asked if the program had to be subsidized in any way by the participating companies. MR. BLAKER answered that the insurance carriers have to subsidize fairly substantially. He does not see that there is way they could structure this program to be self-supporting, given the medical conditions they have. CHAIRMAN ROKEBERG asked Mr. Blaker to provide the scope of the number of insureds and the dollar subsidy. MR. BLAKER responded he thinks there are approximately 220 plan members and it has been in that range for some time. The current assessment is $1.5 million. In response to the chairman's comment about that being per year, Mr. Blaker answered he thinks this amount will not provide a complete year now. CHAIRMAN ROKEBERG noted, then, the insurance carriers doing business in the state pay in excess of $1.5 million per year to insure 220 people as a subsidy. The chairman confirmed from Mr. Blaker that is correct. The chairman indicated to Representative Cissna this is why they do not want to increase the percentage for mental and nervous condition coverage. REPRESENTATIVE CISSNA indicated she believed this could bring the cost down. CHAIRMAN ROKEBERG expressed his doubt, requesting evidence. Number 1260 REPRESENTATIVE HALCRO asked Mr. Blaker to describe the members' medical conditions. MR. BLAKER indicated there is broad range of conditions including diabetes, heart problems, some kidney transplants, and quite a number of what is termed the height-weight ratio. He said the nurse case manager might be available to provide further information. CHAIRMAN ROKEBERG commented there is usually an annual report; this will be distributed to the committee members when received. The chairman noted this is important to understand because it helps put the state's health insurance problem into perspective: why this committee examines health insurance and spends so much time on it. Chairman Rokeberg indicated this entire equation, what happens to the consumer and the availability of health insurance, is the reason they are looking for statistics with legislation like HB 158. The chairman confirmed from Mr. Blaker that the legislation would allow the plan to hire a third-party administrator who is not necessarily an underwriter in Alaska. The chairman questioned the rationale for this, asking if it would help reduce costs or relieve Aetna from this responsibility or if there is some other reason. Number 1376 MR. BLAKER indicated the feeling is it would open the bidding to a more competitive process. They have not been particularly successful in getting bids in the past; he said bids have been notably absent. In response to the chairman's comment about Aetna being "stuck" with this duty from the beginning, Mr. Blaker indicated he would not use the term "stuck;" he thinks Aetna has done a pretty good job. Mr. Blaker noted, though, there might be a TPA [third-party administrator] who could perform the function at a lesser expense. CHAIRMAN ROKEBERG emphasized he had not meant his comment pejoratively, indicating he only meant Aetna volunteered or was put in the position initially, and has maintained that position in the absence of other bidders. The chairman pointed out to the committee that Aetna has done a good job here, but it is something that is perhaps semi-involuntary. He asked Mr. Blaker if that would be fair to say. MR. BLAKER answered in the affirmative, noting, "We stepped up to the plate, ... being a major insurer up here, we wanted to ... take the project and do it." Number 1438 REPRESENTATIVE HALCRO, noting the testimony of the sponsor's representative that [company] participation is based on market share, asked if Aetna is the largest provider of health insurance in the state and if that is why the company has the responsibility for overseeing the program. MR. BLAKER answered that is not correct. The administrator was decided by competitive bid. Mr. Blaker appeared to indicate Aetna is administering the association because there were no other bids. He said that Blue Cross currently probably insures more members in the state. Mr. Blaker reminded the committee they are strictly speaking of insured contracts. Self-insured contracts are excluded and cannot be assessed. This is one of the problems he thinks these pools will have to address at some point. CHAIRMAN ROKEBERG asked if ERISA-covered underwritten group plans provide assistance to the pool. MR. BLAKER noted they cannot assess the self-insured plans, but they can assess the insured plans. CHAIRMAN ROKEBERG said, for example, a large PPO [preferred provider organization] group that could be exempt from insurance mandates [of the state] would contribute here. Number 1554 JOHN FERENCE, Deputy Director, Division of Insurance, Department of Commerce and Economic Development, testified next off-network via teleconference from California. Mr. Ference commented the two previous speakers had done an admirable job of describing the legislation, and the overall operation of the program. He stated the Division of Insurance does support the legislation; it feels these are worthwhile, necessary changes to CHIA's operating plan and hopes the committee will pass the legislation on. He confirmed for the chairman there is a board which sets some of the policy. CHAIRMAN ROKEBERG referred to language in Section 9 of CSSB 48(HES), subsection (c), "... The premium for a state plan may not exceed 200 percent of the standard risk premium rates determined by the board [AVERAGE OF THOSE FIVE ESTIMATES]." The chairman questioned whether the previous testimony that the premiums were at about 150 to 160 percent of individual premium rates was correct. MR. FERENCE answered in the affirmative, noting the division's assessment is it is at approximately 175 percent but the distinction is minor. CHAIRMAN ROKEBERG confirmed, then, the board attempts to stay below the 200 percent cap. However, since the board is made up of underwriters, the chairman questioned that the new language would have an impact on their self-assessment. Number 1618 MR. FERENCE answered that was one of the past potential problems. He indicated there was a potential for self-interest in the board structure and the division felt it was important to strengthen the public participation in the board. This is one of the areas the legislation addresses. The legislation will alter the way the board votes, giving more weight to the votes of the consumer representatives - the board's public members. In response to the chairman's request for this specific bill section, Mr. Ference noted he did not have a copy of the bill but said it is in the first section, where it states that the board members will cast votes on a one vote, one member basis. The original and existing enabling legislation allowed votes to be based on percentage of health insurance writings in the state; this essentially precluded an effective vote by the public members. CHAIRMAN ROKEBERG questioned why this was done. MR. FERENCE answered that the original legislation was cast in terms of resting the operating authority on a proportionate basis with insurers' activity levels within Alaska. Mr. Ference noted he wasn't involved with this original founding, so he does not know why they did not make an accommodation for effective voting by public members. That is one of the items this legislation is intended to correct. Number 1720 CHAIRMAN ROKEBERG commented, then, there is the board of directors and the association; the weighting is in the association but the board is based on the five members. He asked if that was correct. MR. FERENCE responded that the association itself is the collective body of health insurers in the state. When the membership elects board members, their votes are based on their proportion of the writings in the state. In addition, the association membership must select two public members. All of these nominations, both the insurance company representatives and the public members, are subject to the director of the Division of Insurance's veto. Under the original legislation, once the members had been elected to the board they were still authorized to vote based on their proportionate writings. This legislation would change that: once the board members have been elected, they would vote on a one member, one vote basis. CHAIRMAN ROKEBERG asked if the division had polled the association members about this change and the loss of their (indisc.). MR. FERENCE answered in the affirmative, noting the association and the existing board are supportive of the change. CHAIRMAN ROKEBERG indicated this put the association members at some financial risk if the board chose to lower the percentage level of the premium. MR. FERENCE agreed that would put the carriers at greater risk. CHAIRMAN ROKEBERG confirmed, then, there is greater potential for that to happen, although the weighting [board member make-up] is still five to two. MR. FERENCE agreed. The insurer members are still a majority of the board. Number 1832 REPRESENTATIVE CISSNA confirmed Mr. Ference had heard her previous question to Mr. Blaker regarding the 50 percent for mental and nervous conditions opposed to the 100 percent for medical. Representative Cissna said she is trying to understand the dynamics here. She asked if there are rules the division abides by on this or if it is just statutory. MR. FERENCE indicated those coverage levels are set to be equivalent to the minimum standards required under the federal Health Insurance Portability and Accountability Act (HIPAA); those are the thresholds required of group insurers under HIPAA. CHAIRMAN ROKEBERG questioned if Representative Cissna was familiar with HIPAA. He indicated the committee had done an 80-page bill the previous session to conform state law with this federal law. The chairman explained HIPAA was an endeavor to allow people to carry their coverage from one place to another, or to establish coverages, et cetera. He indicated one provision of HIPAA required states to have a universal coverage type of health insurance availability if the state did not have a high-risk pool. Alaska already had the high-risk pool in place; the state met one of HIPAA's major provisions by having this pool in place and ensuring its viability. Number 1942 REPRESENTATIVE HALCRO referred to Section 4 of CSSB 48(HES), which read as follows: * Sec.4. AS 21.55.100(d) is amended to read: (d) The association may make available to a person eligible under this chapter [RESIDENTS WHO ARE HIGH RISKS AND TO FEDERALLY DEFINED ELIGIBLE INDIVIDUALS] coverage through a health maintenance organization or other managed care arrangement if [AS] approved by the director. Deductible, copayment, and calendar year maximum limits provided through an organization or arrangement are not subject to the limits described in AS 21.55.120, but the limits must be approved by the director. REPRESENTATIVE HALCRO questioned whether the new second sentence regarding deductibles, et cetera, is an opportunity for arbitrary fluctuations based on the director's whim. He asked if there were safeties in place. Number 1975 MR. FERENCE responded that the purpose of that language is to allow flexibility in plan design; it was not intended to introduce an arbitrary or capricious element. CHAIRMAN ROKEBERG indicated there is an annual or periodic report required by the division about the premiums and how CHIA works. MR. FERENCE answered that the association provides an annual report. CHAIRMAN ROKEBERG asked when the last one had been issued. MR. FERENCE deferred to Mr. Blaker. Number 2011 MR. BLAKER believes they are currently working on another report, indicating they are in the auditing process. He expressed uncertainty about when this new annual report would be available. CHAIRMAN ROKEBERG requested a copy of the most recent report. MR. FERENCE indicated the committee would be provided with copies on April 19, 1999. Number 2056 MR. GRAY indicated he could provide an answer that had been given in another committee to Representative Halcro's question. The feel there was that a $200 deductible just did not fit the situation of a person with these types of conditions. The participants wanted a higher deductible because it was better for them financially. Inserting the language in question would give CHIA more flexibility to design the premium and copayment plan to better fit the participants' medical situation. Mr. Gray noted he believes that was Director Burke's answer [Marianne Burke, Director, Division of Insurance]. CHAIRMAN ROKEBERG referred to language on page 5 of CSSB 48(HES), in Section 7, "(c) The [EXCEPT AS PROVIDED FOR IN (e) OF THIS SECTION, THE] sum of the deductible and copayments required in any calendar year under a plan may note exceed a maximum limit of $1,500 plus the deductible [$2,000 PER COVERED INDIVIDUAL]. ..." The chairman asked if that actually increased the amount depending on the deductible level. He questioned the purpose there. Number 2109 MR. FERENCE answered that the purpose was to add flexibility so that plans could be tailored more closely to the individual's needs. CHAIRMAN ROKEBERG noted, then, that if a person had a higher deductible it would be the $1,500 plus the deductible: a person could be over the former $2,000 limit depending on his/her deductible. He confirmed from Mr. Ference that that was a correct summarization. The chairman commented, "Then so it's geometric ...." He confirmed there were no further questions for Mr. Blaker or Mr. Ference. The chairman expressed his desire to move the legislation but to also educate the committee further. After some brief discussion with Mr. Ference regarding his and Ms. Burke's availability, and a suggestion from Representative Brice regarding a work session to review the CHIA annual report, Chairman Rokeberg announced his intention to have Mr. Ference and Ms. Burke speak on this issue, and perhaps on health insurance in general, to the committee at a later point in the session. The chairman thanked the witnesses and closed the public testimony on SB 48. Number 2196 REPRESENTATIVE HALCRO made a motion to move CSSB 48(HES) out of committee with individual recommendations and the attached zero fiscal note. There being no objection, CSSB 48(HES) moved out of the House Labor and Commerce Standing Committee.